The figures used for investment performance and the figures shown in the projection may represent different points in time.
The Investment Overview may show contributions and invested capital projected to the end of the calendar year.
IRR, however, measures investment performance based on the investment position up to the current month.
Example
Assume it is August and the client contributes $1,000 per month.
The Investment Overview may show the full year's expected contributions:
$1,000 × 12 = $12,000
For IRR, GoalsMapper only considers contributions expected to have been made up to the current month (the current month is excluded):
$1,000 × 7 = $7,000
The invested capital used in the IRR calculation may therefore be lower than the invested capital shown in the year-end projection.
This difference is intentional.
Including contributions that have not yet been made would distort the investment's historical return.
What if no contribution month is provided?
Where contribution timing requires a starting month and no month has been provided, GoalsMapper assumes the contribution period begins in January.
Where a starting month is provided, the contribution schedule will instead follow that month.
Why can the IRR change from month to month?
GoalsMapper calculates IRR using the investment position up to the current month.
As each month passes:
- Additional recurring contributions may be included
- The period over which existing contributions have been invested changes
- The current investment value may change
- Other investment cash flows may be included
As a result, the IRR may change each month even if you have not changed the investment configuration.
This is expected and reflects the investment's updated position at that point in time.
How precise is the timing?
GoalsMapper calculates investment cash-flow timing to the month, rather than the exact transaction date.
The IRR should therefore be considered accurate based on monthly timing, rather than to the exact day.
Why might GoalsMapper's IRR differ from another calculator?
Another calculator may use different timing assumptions, such as:
- Treating all contributions as occurring at the beginning of the year
- Treating all contributions as occurring at the end of the year
- Including contributions expected for the entire year
- Using exact transaction dates
- Using a different valuation date
Because IRR is sensitive to when cash flows occur, different timing assumptions can result in different annualised returns.